This report analyses the recent trends in Pakistani Information Technologies (IT) and InformationTechnologies enabled Services (ITeS), as well as obstacles confronted by firms.
... See More + The authors assess the importance of trade costs as a barrier to services growth and development in Pakistan’s domestic market and to seizing the opportunities of global trade. The report also aims to understand and examine the impact of obstacles (i.e., trade costs) confronted by firms. These obstacles increase the costs of selling services and may reduce capacity to compete both in the local market (Pakistan) as well as overseas (exports). These obstacles include direct costs generated by policy barriers that limit market entry, but can also include infrastructure deficiencies, geographical location, and institutional capacities, and/or obstacles imposed by regulatory measures. Among the latter obstacles, examples include difficulties in accessing the information necessary to operate in a market, the predictability and stability of the business environment in a market, and the quality of the decision-making process and administrative procedures of competent authorities in the domestic and export markets. The focus of the report is the trade costs confronted by IT and ITeS firms. IT and ITeS operations are the backbone to provide digital services, digital goods and depend on digital technologies, conform an integral part of the overall ecosystem. The report relies on a survey conducted on 782 IT and ITeS firms across different cities. The objective of the survey was to examine the importance of these factors for Pakistani firms and to provide advice to policymakers. To complement the survey results, the main findings were discussed in focus group structured interviews. Firms interviewed covered different services activities beyond software companies and included both exporters (534 firms) and non-exporters (248 firms), reflecting the export competitiveness as well as domestic competitiveness of Pakistan's IT services sector. The analysis aims to improve our understanding of Pakistan's IT performance and the obstacles confronted in this field.
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This note discusses the role that import duties have in Pakistan’s economy, and their links with export competitiveness. Import duties play two key roles.
... See More + First, they are a source of tax revenues for governments. Second, when imposed on a product, they create a wedge between its world price, and the price paid domestically (as well as a wedge between its domestic price, and the price of its substitute in the domestic economy). These wedges affect the allocation of resources. They divert resources away from export markets - in which firms will only fetch world prices for the product - and into the domestic market, effectively creating an anti-export bias. Thus, an import duty is implicitly an export duty. When these duties are applied on inputs that different sectors use to produce, the duty induces firms to substitute away from that - now more expensive - input, and into other substitutes, thus affecting the otherwise optimal technological choice of firms, as well as increasing their production costs. This note is organized as follows: the first section presents a snapshot of import duties in Pakistan. The second section empirically examines the ways import duties induce an allocation of resources that is different from the one that will be obtained without the duty distortion. The third section looks at the role of tariff policy in the context of the COVID-19 (Coronavirus) pandemic. The fourth section briefly describes the recent changes in the tariff policy institutional arrangement. The fifth section concludes and provides policy recommendations moving forward.
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Increased international production fragmentation implies that firms at home rely on imported intermediates for production. In this context, tariff policy design needs to consider the impact downstream of changes in tariffs upstream.
... See More + Policy makers embarking on tariff reforms need to answer questions such as: what is the impact of tariff changes on production costs downstream? What are the key input tariffs that could be reduced to lower production costs in priority sectors considering sectors' backward linkages? Or how will a tariff rationalization plan that focuses on tariff reductions in raw materials and intermediates affect effective protection across sectors? This paper presents the Upstream Tariff Simulator, a simple Microsoft Excel–based tool designed to help policy makers answer these questions, by combining information on tariffs and input-output structures and allowing alternative sectoral aggregations, and alternative market structures for input markets. It provides the underlying conceptual framework and a range of examples that show the insights that the tool can provide to policy makers when analyzing the impact of tariff reforms.
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This handbook intends to be a resource for those interested in trade policy reform, in Pakistan and elsewhere. It arose from the Pakistan trade and investment policy program (PTIPP).
... See More + The PTIPP was designed to work on trade, competitiveness, and gender in Pakistan. This handbook focuses on two pillars of the PTIPP: trade policy and trade facilitation. The objective of the trade policy pillar was to develop a comprehensive medium-term regional trade strategy underpinned by high-quality analysis, in line with international good practice. The objective of the trade facilitation pillar was to reduce the time, cost, and documentation required to process exports and imports through key border posts, leading to a substantial increase in the volume of goods traded. To achieve these objectives, the PTIPP engaged with policy-making institutions, the private sector, including female entrepreneurs, and government to promote international trade, investment, gender equality, and regional integration. The authors focused on producing a document that not only lists results and recommendations but also guides the reader through how the analysis was conducted and how the recommendations were reached. This handbook also provides a set of guidelines for analyzing competitiveness in any country and shows how the lessons learned in Pakistan can apply to other economies. It will therefore be useful for teams conducting competitiveness analyses in other countries and regions.
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Turkey’s pace of income convergence has globally been one of the most remarkable of the past fifteen years. Sustaining growth and improvements in living standards in Turkey will require higher productivity in the economy.
... See More + The Turkey Productivity Report (2019) provides an in-depth analysis of firm productivity in Turkey and how this adds up to economic growth in the country. The report has six parts. The first two provide macro and micro diagnosis of productivity in the economy – what are the productivity trends, how have these affected economic growth, what firms in what industry are the most productive, and are they absorbing an increasing or decreasing share of resources? From here the report analyzes specific policy areas that might explain firm productivity dynamics in Turkey – namely firms’ integration in the global economy, access to innovation support, the quality of human capital, and the business environment including competition. The report finds that economic integration and innovation have boosted firm-level productivity, though reforms could further accelerate these positive impacts. Productivity gains could accelerate the demand for more educated and skilled workers. The growth of more productive firms could in turn also be accelerated through reforms that increase competition and reduce regulatory burden.
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This paper examines patterns of market integration for food commodities in India. First, it tests the extent of domestic spatial market integration for retail and wholesale markets in 2006–14 and 2008–15, respectively, and looks at patterns of price transmission of shocks from international sources.
... See More + Second, it measures vertical integration from wholesale to retail markets and tests for asymmetric speed of adjustment to shocks. Third, it examines the determinants of spatial integration. The results reveal that in India, food markets are imperfectly integrated across space, with the law of one price being systematically rejected, with heterogeneities across states and products. There is substantial co-movement between wholesale and retail prices, although integration is still imperfect in all commodities but one: rice, for which perfect vertical integration cannot be rejected. Retail prices adjust faster when wholesale prices rise than when wholesale prices fall. The analysis of the determinants of spatial integration reveals that prior to implementation of the Goods and Services Tax, the mere act of crossing a state border increased prices; unexploited gains from arbitrage persisted after considering the effects of transport costs; and information frictions and menu costs reduced market integration.
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This paper examines the patterns of growth of Poland, and its transition into high-income status over the past two decades from a macro and micro perspective.
... See More + It benchmarks Polish performance with that observed in established high-income countries, and with that of others that have been trapped in middle--income levels and examines the role that integration into the EU had on growth. The analysis reveals, first, that Poland’s growth process has been accompanied by a process of diversification of assets, including institutions, physical and human capital. Second, that the progressive integration into the EU bloc boosted growth and productivity because of three keyfactors: (i) increased openness to trade, investment and talent, (ii) increased domestic competition, and regulatory harmonization with EU, (iii) increased certainty in reforms, through a commitment to EU-institutions. Third, that for full convergence to high-income levels, Polish firms need to increase their innovative capacities. The paper extracts lessons applicable to other economies trapped in middle-income levels, as well as to Poland itself to consolidate growth looking forward.
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The World Bank prepared three background studies as inputs for the development of the Cambodia Logistics Master Plan led by the Royal Government of Cambodia (RGC) in 2017–2018.
... See More + These studies benefit from a close coordination and collaboration with Japan International Cooperation Agency (JICA) that focused its assessment on transport infrastructure and connectivity. The key findings and recommendations are summarized into four parts in respect of the three background studies: (a) an update of trade competitiveness, (b) a review of the legal and regulatory framework of the logistics sector in Cambodia, and (c) a design of the monitoring and evaluation (M&E) framework for the proposed Cambodia Logistics Master Plan.
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The report begins with a chapter on economic developments, with sections on growth, fiscal policy, public debt, the external sector, monetary developments and inflation, and the financial sector.
... See More + The second chapter provides a medium-term macroeconomic outlook and describes risks faced and upcoming challenges, including structural reform needs. The third chapter concludes by stressing the importance of creating a skilled labor force that is more productive and better able to adopt and adapt to new technologies—the core of Pakistan’s growth path.
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The Europe and Central Asia (ECA) region has a rich history of regional integration and connectivity to the broader world economy, which has stimulated the growth of knowledge and technological innovation.
... See More + Indeed, through migration, trade, investments, and other interactions, ECA countries have depended on, and benefited from, connectivity with other countries for centuries. A key insight of this report is that ECA’s international connectivity through trade, foreign direct investment, migration, telecommunications, transportation, and other avenues facilitates the transfers of knowledge and technology that are critical to long-term growth and shared prosperity. These connections complement one another because of the tacit (learning by doing), rather than explicit (contained in books or blueprints), nature of knowledge transfers. Migration, for example, enhances knowledge spillovers through trade and foreign investment by migrants transferring information on foreign markets and supporting connections to them. Similarly, the internet and efficient transport links are both necessary for successful e-commerce. This short publication summarizes the main findings of the World Bank flagship study Critical Connections. Critical Connections was born out of the desire to help policy makers focustheir attention on their long-term goals of regional and global integration to capture the benefits of connectivity, from which ECA countries had advanced so far during the early years of market expansion in the 1990s and early 2000s. Its primary purpose is to offer a deep analysis of ECA connectivity and how it has evolved over the past two decades. In a key innovation of the study, a network analysis measure of multidimensional connectivity captures the relationship between different forms of connectivity and their joint impacts on growth and the transmission of shocks.
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The Europe and Central Asia (ECA) region has a rich history of regional integration and connectivity to the broader world economy, which has stimulated the growth of knowledge and technological innovation.
... See More + Indeed, through migration, trade, investments, and other interactions, ECA countries have depended on, and benefited from, connectivity with other countries for centuries. A key insight of this report is that ECA’s international connectivity through trade, foreign direct investment, migration, telecommunications, transportation, and other avenues facilitates the transfers of knowledge and technology that are critical to long-term growth and shared prosperity. These connections complement one another because of the tacit (learning by doing), rather than explicit (contained in books or blueprints), nature of knowledge transfers. Migration, for example, enhances knowledge spillovers through trade and foreign investment by migrants transferring information on foreign markets and supporting connections to them. Similarly, the internet and efficient transport links are both necessary for successful e-commerce. This short publication summarizes the main findings of the World Bank flagship study Critical Connections. Critical Connections was born out of the desire to help policy makers focustheir attention on their long-term goals of regional and global integration to capture the benefits of connectivity, from which ECA countries had advanced so far during the early years of market expansion in the 1990s and early 2000s. Its primary purpose is to offer a deep analysis of ECA connectivity and how it has evolved over the past two decades. In a key innovation of the study, a network analysis measure of multidimensional connectivity captures the relationship between different forms of connectivity and their joint impacts on growth and the transmission of shocks.
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Uruguay has much to gain from further integration with the global marketplace. Increased trade allows economies of scale and increases exposure to technological and knowledge spillovers, resulting in greater productivity.
... See More + Participating in global and regional value chains is an important launch-pad for international integration. Uruguay requires a multipronged strategy that targets increased sophistication of Uruguay’s productive structure and diversification into specialized, high-value, modern services exports unconstrained by lack of economies of scale or distance. This report analyzes the dairy and Information & Communications Technology (ICT) and ICT Enabled Services (ICTES) value chains in Uruguay to identify opportunities for industry-specificupgrading and integration with global value chains (GVCs). By taking the dairy and ICT/ICTES value chains as concrete cases, the analysis piloted here illustrates how a traditional industry, locked in low value added exports, such as dairy, and a new export service industry, such as ICT/ICTES, can tackle the remoteness and ‘smallness’ challenges of Uruguay, and pursue economic upgrading andbetter international integration. The analytical approach targets opportunities to both enter new international production networks and participate in higher-value-added business segments. These objectives align with the Government of Uruguay’s priority to determine how the country can integrate better with global markets through GVCs. GVCs have four key features that set them apart from traditional production and trade: (1) customization of production—with intensive contracting between parties, often subject to distinct legal systems, (2) sequential production decisions going from the buyer to the suppliers, (3) high contracting costs, and (4) global matching not onlyof goods and services, but also of production teams. These distinct features of GVCs have implications for the overall business environment conducive to fertile grounds for GVCs to prosper, as well as for the types of trade facilitation efforts, infrastructure, skills, and trade and investment policies that are best suited for this reality.
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Uruguay has much to gain from further integration with the global marketplace. Increased trade allows economies of scale and increases exposure to technological and knowledge spillovers, resulting in greater productivity.
... See More + Participating in global and regional value chains is an important launch-pad for international integration. Uruguay requires a multipronged strategy that targets increased sophistication of Uruguay’s productive structure and diversification into specialized, high-value, modern services exports unconstrained by lack of economies of scale or distance. This report analyzes the dairy and Information & Communications Technology (ICT) and ICT Enabled Services (ICTES) value chains in Uruguay to identify opportunities for industry-specificupgrading and integration with global value chains (GVCs). By taking the dairy and ICT/ICTES value chains as concrete cases, the analysis piloted here illustrates how a traditional industry, locked in low value added exports, such as dairy, and a new export service industry, such as ICT/ICTES, can tackle the remoteness and ‘smallness’ challenges of Uruguay, and pursue economic upgrading andbetter international integration. The analytical approach targets opportunities to both enter new international production networks and participate in higher-value-added business segments. These objectives align with the Government of Uruguay’s priority to determine how the country can integrate better with global markets through GVCs. GVCs have four key features that set them apart from traditional production and trade: (1) customization of production—with intensive contracting between parties, often subject to distinct legal systems, (2) sequential production decisions going from the buyer to the suppliers, (3) high contracting costs, and (4) global matching not onlyof goods and services, but also of production teams. These distinct features of GVCs have implications for the overall business environment conducive to fertile grounds for GVCs to prosper, as well as for the types of trade facilitation efforts, infrastructure, skills, and trade and investment policies that are best suited for this reality.
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This report examines how Nepal could move away from a remittance-driven growth model by reforming its trade policies to increase competitiveness.
... See More + In Nepal, remittances are a key source of income of foreign exchange. They help alleviate financial constraints of households, lifting many out of poverty. However, from a macroeconomic perspective, remittances also contribute to large trade deficits, and to an appreciation of the real exchange rate (World Bank, 2016). Remittances put upward pressure on the prices of non tradable goods, and with a nominal exchange rate that is pegged to the Indian rupee, the result is an appreciation of the real exchange rate. In turn, the appreciation of the real exchange rate favors imports, and biases against exports by making domestic goods uncompetitive. This report proposes several trade policy reforms aimed at increasing competitiveness to break this vicious cycle. The report examines the extent to which Nepal has been tapping into its trade potentials, the underlying obstacles that it faces, and the type of policy reforms that could turn trade and investment into a vehicle for growth. Five key messages emerge from the analysis. First, Nepalese exporters remain small, and struggle with increasing their shipments once they enter a new market, rather than with the fixed cost associated with entering. This is essentially due to severe supply-side constraints that affect their trade and production costs. Second, Nepalese firms under utilize existing trade agreements and granted trade preferences. Third, diversification opportunities lie in fast-growing economies in East Asia and the Pacific. Efforts regarding connectivity, trade facilitation and export intelligence could help firms get to those markets. Fourth, to reduce the anti-export bias of its trade policy infrastructure, Nepal needs to simplify its tariff code, reduce tariffs on crucial intermediates, and embrace deeper integration, starting with more openness to services and investment. Fifth, trade reforms in Nepal are welfare enhancing on average, and pro-poor. The report is structured in two sections. The first one identifies unexploited trade potentials and assesses the extent to which Nepalese firms have been profiting from regional integration initiatives, and from granted trade preferences.The second section examines alternative scenarios for tariff reforms that would substantially improve the import-to-export environment, taking the fiscal restriction very seriously. It analyzes avenues to simplify its tariff code and reduce its anti-export bias and estimates the fiscal revenue cost. Section III considers fully exploiting trade potentials. The first part of the section uses a gravity-founded framework to identify potentials, and identifies whether under performance is explained due to challenges to diversify or challenges to increase shipments in existing destinations. It looks at patterns of trade and trade commentaries by region and trading bloc. Then, it assesses the extent to which Nepal benefits and uses existing trade agreements and trade preferences. Finally, it looks at how Nepal can benefit from moving to deeper integration schemes, particularly by further integrating with respect to investments and services trade. Section IV looks at improving the import-to-export environment. The first part of the section presents international evidence on the importance of trade policy reforms for competitiveness. Then, it carefully estimates the trade and tax impact of five alternative tariff reforms and presents a proposal for medium- and short-term changes, as well as alternatives to recouping potential tariff revenue losses.
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